Prime Minister Narendra Modi of India with Japanese business leaders in Tokyo on Friday.Credit...Toru Yamanaka/Agence France-Presse — Getty Images

By Jonathan Soble

Nov. 11, 2016

TOKYO — Despite objections from antinuclear campaigners, Japan’s government cleared the way on Friday for companies that build nuclear power plants to sell their technology to India — one of the few nations planning big expansions in atomic energy — by signing a cooperation agreement with the South Asian country.

The deal is a lifeline for the Japanese nuclear power industry, which has been foundering since meltdowns at the Fukushima Daiichi power plant in northeastern Japan in 2011. Plans to build a dozen new reactors in Japan were canceled after that, a gut punch for some of the country’s biggest industrial conglomerates, including Toshiba and Hitachi.

With the domestic market moribund, Japanese companies had been pursuing deals abroad, but success was elusive.

The economic case for nuclear energy has weakened as a result of low oil and gas prices, prompting utilities and governments around the world to rethink construction. The Fukushima disaster increased safety concerns. And Japanese vendors have had to fight lower-cost rivals from places like Russia and South Korea for a shrinking number of customers.

India looks like a rare opportunity. It is planning 20 new reactors over the next decade or so, and as many as 55 more have been proposed. Shinzo Abe, the Japanese prime minister, and Narendra Modi, his Indian counterpart, are hoping that trade can underpin a broader strategic relationship, aimed in part at fending off China.

The nuclear deal has nonetheless drawn criticism in Japan. India possesses atomic weapons and has kept itself outside the international legal framework against proliferation. Because of that, many in Japan, which was hit by two nuclear bombs in World War II, would prefer not to establish ties with nuclear power.

Left-leaning Japanese newspapers have published editorials against the Indian deal, and the mayors of Hiroshima and Nagasaki, the bombed cities, have issued pleas to stop it. Formal negotiations by the two governments lasted six years. Other countries have already begun allowing nuclear-related exports to India, including the United States, which signed a similar accord a decade ago.

“There was a huge outcry when the government first said it would pursue this” in 2010, said Masaaki Fukunaga, a professor at the Center for South Asian Studies at Gifu Women’s University in Gifu, Japan, who has followed the issue closely. “The industry and the government were determined.”

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Smoke rising from a reactor at the Fukushima Daiichi nuclear power plant after meltdowns in March 2011.Credit...Tokyo Electric Power, via Reuters

Mr. Abe said Japan had reserved the right to stop nuclear exports if India conducted another nuclear weapons test. “There is a legal framework to ensure India’s responsible and peaceful use of technology,” he said.

Japanese leaders say they are looking to support more than just the nuclear industry. National economic growth may be at stake. As Japan has become less competitive in sectors like consumer electronics, big industrial projects are being counted on to fill the gap.

In addition to the nuclear accord signed on Friday, Mr. Abe and Mr. Modi agreed to explore plans to build additional high-speed rail lines in India based on Japan’s Shinkansen bullet-train technology. Construction on a previously agreed line from Mumbai to Ahmedabad will begin in 2023, the leaders said. Japan will help finance the project with low-interest loans.

Japan’s push to become a global infrastructure powerhouse has had setbacks. Vietnam’s legislature scrapped plans in 2010 for a Shinkansen train line, citing costs, and is reportedly close to canceling plans for a proposed Japanese-built nuclear power station. Indonesia chose a Chinese group’s bid last year to build a high-speed rail line over a Japanese bid that had been considered the favorite.

South Korea underbid Japan to win a contract to build the first nuclear reactors in the United Arab Emirates. And Tokyo Electric Power, owner of the ruined power station in Fukushima, pulled out of a bid to build and run a nuclear power station in Turkey. A Japanese-French consortium ultimately won the Turkish contract in 2013, after a strong diplomatic push from Mr. Abe, but it remains the only successful Japanese nuclear-plant sale since the Fukushima accident.

The bet on India is no sure thing. Nuclear plants can take decades to plan and build, and proposals to develop them are vulnerable to political and economic shifts. The Indian government must find new locations for some proposed plants because of local protests. And even for countries that have already signed nuclear trade agreements with India, little actual business has materialized so far, in part because of an Indian law that opens hardware vendors to potentially unlimited liability claims in the case of accidents.

India has been working with the United States and other countries to create a framework for minimizing vendors’ liability risk, including the creation of a domestic accident compensation fund. Officials hope to complete it next year.

If that hurdle can be overcome, the first Japanese company to benefit from the agreement with India will most likely be Toshiba, whose American subsidiary Westinghouse has won conditional approval to build six reactors in India. Westinghouse uses components from Japan, including reactor-containment vessels built in Japanese steelworks, so the deal signed on Friday is essential to moving forward.

Toshiba needs the boost. It acquired Westinghouse in 2006 for $5.4 billion, a princely investment upon which it was struggling to earn a return, even before Fukushima. Investigators examining a $1.2 billion accounting scandal at Toshiba last year concluded that managers had inflated revenue figures at the company in large part to cover up the poor financial state of its nuclear power business.